Sponsored by the California Energy Storage Alliance, AB 546 would create a handbook of best practices for permitting energy storage systems and establish limits on what communities can charge for permits, said Alex Morris, director of policy and regulatory affairs for CESA. The handbook is designed as a model other states may use.

California regulators recently doubled incentives for the Self-Generation Incentive Program, giving the lion’s share to energy storage funding. They ruled that the state’s investor-owned utilities must collect $83 million annually between 2017 and 2019 for the SGIP program. That’s double what was collected in 2008. The incentive program includes a carve-out for residential customers.

“We’re expecting hundreds of permit requests,” said Morris. “They will start coming through the SGIP program. The program has been on hold for a long period of time. Now it’s opening in rolling steps. It has a residential carve out. We’re expecting to see a number of small systems.”

Local governments unfamiliar with how to permit energy storage

While all these applications are good news for the storage industry, local governments aren’t familiar with energy storage and could hold up the permitting, he said.

“The purpose here is to give cities and counties helpful tools. The vast majority of projects are small behind-the-meter projects that have to connect with the utility and go through the permitting process,” said Morris. The best practices permitting handbook would be helpful to government agencies that don’t have the funding to learn how to permit energy storage systems.

The bill also requires that the government agencies state clearly the cost of permitting. They’re required to charge only the price of permitting, and not inflate the price to make money, he said.

“In some cases, one city or county has a low-cost fee, and another city or county has a high price, setting an artificially high permitting price,” he said.

Putting a price on ability to ramp quickly

Meanwhile, the California Energy Storage Alliance has its eye on work by California regulators to put a price on the ability of resources to be flexible and ramp up quickly, he said. Last week, the California Public Utilities Commission passed resource adequacy rules that relate to this issue.

“Every year they have to make resource adequacy targets. Originally they were going to look at updating or revisiting how they approach the system’s flexible capacity needs,” said Morris. The PUC discussed establishing what’s called a “durable flexible product,” a standard product that producers can participate in. CESA had hoped the PUC would focus more on establishing a product that would include prices that compensate storage providers for their ability to ramp up quickly, Morris said.

“The portfolio we use to run the grid is evolving,” said Morris. “You need a set of resources that you can have standing by to absorb extra solar and run the gauntlet of providing grid services, take directions from the California ISO, and provide four hours of energy at a time to meet peaking needs. Storage is very well positioned to provide a lot of those services.”

“The portfolio we use to run the grid is evolving. You need a set of resources that you can have standing by to absorb extra solar…”

Right now, some are concerned the state is relying too much on natural gas in ways that work against its ambitious emissions-reduction targets, he noted. Natural gas power plants are kept idling, waiting for solar production to drop off, so that they can respond.

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“You have to keep them around just for this momentary ramping need, and you have to burn fuel, and you end up with the emissions effects of natural gas,” said Morris.

“There’s a lot of money in it…”

While natural gas is expected to play an important role for California for a long time, there’s room for storage to compete against natural gas, especially if storage providers are compensated for their ability to ramp up quickly and provide flexibility, he said.

At this time, older gas plants that are slow to ramp up, new gas plants, and storage all qualify as “flexible,” and receive the same payments, even though they provide different levels of flexibility.

A storage device that can ramp 300 MW in a few minutes counts the same as the other resources, he noted.

“This is an ongoing and important regulation,” said Morris. “It’s one of the most important issues. There’s a lot of money in it, and it’s all about running the grid reliably.”

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